What Obama Can Learn From FDR

Nov. 16 (Bloomberg) -- Here’s my advice for President
Barack Obama as he embarks on his second term: Follow the
example of one of your heroes, Franklin Delano Roosevelt. Not
the Roosevelt of the first two terms but the Roosevelt of the
next two. The Roosevelt who won the war.

Everyone agrees that the economy is recovering from the
recession far too slowly. Everyone wants U.S. businesses to
start hiring again. The Obama administration knows it needs to
mend fences with business. Maybe it should study how Roosevelt
pulled it off.

When it entered World War II in 1941, the U.S. was the
world’s mightiest industrial power, but lagged behind the major
belligerents in military strength. Yet in 1942 -- the first year
of war production -- U.S. factories produced more aircraft,
tanks and artillery than all the Axis powers combined. That same
year, the U.S. outproduced Japanese naval yards by an
astonishing 16-to-1.

To accomplish this remarkable feat, Roosevelt had to
recognize that the business community that he had antagonized
and alienated during his first two terms in office held the key
to the nation’s survival. As the historian Richard Overy
explains in his book “Why the Allies Won,” Roosevelt’s response
was basically to turn over war production to his political
opponents.

The administration tried not to micromanage, he writes:
“Corporate bosses had as much, if not more, experience of the
kind of planning and coordination needed in a wartime economy
than did government officials, whose only real experience was
the ill-starred New Deal.”

Ford’s Bomber

One of the most famous stories of the war involves the B-24
bomber, the U.S. wartime mainstay. Henry Ford was invited to bid
on a parts contract. He refused. He would rather build the
entire plane, he said, from start to finish, using the assembly-line method that his company had pioneered.

Even the military was initially skeptical. How could the
mass-production techniques that turned out automobiles be
adapted to the construction of planes, tanks and ships? A car,
after all, had about 15,000 parts; a B-24 bomber had 1.5
million. The tried and true method of building one plane at a
time, rather than using an assembly line, appealed more to both
the generals and the civilians in charge of production.

But Ford insisted that he could build a plant that would
produce a bomber an hour. Nobody thought such a thing was
possible. Nevertheless, in the end, the administration gave him
his head. The result was the Willow Run plant, one of the great
success stories of wartime production. Running full tilt, the
factory almost met the goal that once seemed so laughable: A
finished bomber came off the line every 63 minutes.

It’s not just that Ford was correct. It’s that he was
motivated by the desire to maximize profit, which provided the
necessary incentive to innovate.

As the war went on, notes Arthur Herman in his book
“Freedom’s Forge: How American Business Produced Victory in
World War II,” the business community successfully resisted
efforts to place a single czar in charge of the production of
war materiel. It preferred the extant system, which left
“defense production in the hands of business, not the
government.” Obviously, some of this was self-interest, but not
all of it. According to Herman, the system remained untouched
“largely because everyone could see how well it worked.”

The point isn’t that business is necessarily better or
smarter than government. It’s that government isn’t necessarily
better or smarter than business. That’s why genuine conversation
and the exchange of ideas matter so much.

Obama’s Foot

Unfortunately, the Obama administration, during its first
term, got off very much on the wrong foot. Bob Woodward, in his
book “The Price of Politics,” tells the story of a telephone
call in which Sam Palmisano, at that time the chief executive
officer of International Business Machines Corp., warned then
Chief of Staff Rahm Emanuel that the health-care bill might cost
the company $700 million over 10 years, leading to 20,000 lost
jobs. Emanuel, in Woodward’s telling, responded with profanity-laden disbelief.

But why? An increase in the cost of employees tends to lead
to fewer employees. This isn’t advanced economics. It’s simple
arithmetic. Sometimes the trade-offs are worth it, and being
honest about them is helpful. Environmental regulation hit the
Coal Belt hard, but led to cleaner air. Business doesn’t always
have to get its way. But it needs to be an integral part of a
serious and reflective conversation.

The politics of such conversations are touchy. So far, to
judge from the accounts in Woodward’s book, the Obama
administration has handled them poorly.

That isn’t to say it is easy to handle them well. In his
book “Knowledge and Coordination,” the economist Daniel Klein
points out some factors inhibiting the necessary exchange. “If
the conversation is friendly and cooperative, commentators
clamor against the influence of lobbyists and special interests.
If the conversation is fearsome and demanding,” he writes, “some
complain that business withheld information or misled
officials.”

We might add to Klein’s summary by paraphrasing the legal
scholar Alexander Bickel: If the conversation is one-sided, it
isn’t a conversation at all; it’s a monologue. This has nothing
to do with whether one thinks the administration’s agenda is
anti-business. The president can have abundant good will toward
the private sector and still recognize that there are more good
ideas than his experts and allies have come up with.

Nor is the point whether the administration has friends in
the business community -- obviously it has many. It’s whether
Obama is willing to reach out to those with whom relations are
more strained. Outreach doesn’t mean a speech, or a roomful of
press, but an actual private conversation from which both sides
might learn, followed by the possibility of stepping away from
ideological certainties and allowing businesses to lead rather
than follow.

In both Herman’s and Overy’s telling, that’s what Roosevelt
and his people did. Getting the economy unstuck isn’t the same
as winning the war against fascism, but that doesn’t mean we
can’t use the same methods. Once the U.S. joined the war,
Roosevelt accepted the premise that business executives knew
more about their fields than even the best-intentioned
regulators. The hostility of many executives toward his policies
didn’t change this underlying truth.

From this beginning, political antagonists built together
the mightiest industrial power the world has ever known. If the
U.S. is to maintain its primacy, it could do worse than starting
out the same way.

(Stephen L. Carter is a Bloomberg View columnist and a
professor of law at Yale University. He is the author of “The
Violence of Peace: America’s Wars in the Age of Obama,” and the
novel “The Impeachment of Abraham Lincoln.” The opinions
expressed are his own.)

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